Groupon investors likely to remain wary

Commentary: Despite a cheap stock, firm needs to prove itself

SAN FRANCISCO (MarketWatch) — With their stock trading at 20% of its value a year ago, Groupon’s investors may be hard-pressed to grant the company much hope in its new business ventures — despite the optimism of Chief Executive Officer Andrew Mason.

Reuters

Groupon CEO Andrew Mason on the day of the company’s IPO last November.

On the company’s conference call Thursday afternoon to discuss the worse-than-expected results for the third quarter, Mason and Chief Financial Officer Jason Childs talked about how Groupon’s
GRPN, -2.96%
international business underperformed because of continued economic uncertainty in Europe, and how the company is “setting a new playbook” for Europe. Read: Groupon misses with third-quarter loss.

Mason also talked about how the company has a “massive green field” in front of it, and that it is better positioned to unlock the $3 trillion local commerce market than its rivals. He said the company needs to move “beyond the inbox,” in reference to its direct email of daily discount offers.

It’s Groupon Now business, and new merchant services like payments, are all part of this effort, but these are untested business areas for the company — and investors don’t seem primed to put much faith in them at the moment.

Groupon slammed after earnings

The company is trying to achieve this juggling act of growing new business while simultaneously trimming the costs of the old ones. Groupon laid off about 80 members of its sales team this week, and its total headcount fell by 954 workers from the second quarter.

Wall Street already had low expectations going into the third quarter, and the numbers came in below that projection, with a loss. Groupon is forecasting fourth-quarter revenue of between $625 million to $675 million, and it said it’s on pace for its strongest fourth quarter yet.

Wall Street was expecting revenue at $635 million, and one has to wonder if many analysts will stick their necks out after the company missed its own target.

Groupon’s shares are arguably cheap enough now for investors to show a little holiday faith, but they are likely still singing the post-IPO blues.

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